27 September 2023

Future proofing: How to ensure your golden years are actually golden

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Clint Haynes* says saving for retirement is something no-one can afford to overlook, and he has five saving tips that are easy to implement.

Photo: Monica Silvestre

Saving for retirement is a financial responsibility that nobody can afford to overlook.

Unfortunately, millions of people will reach their golden years with far less money than they will truly need.

In the vast majority of cases, these problems can be attributed to lack of financial education and believing social security will be enough.

The days of relying on just social security and a pension are long gone.

So, what can you do about it?

Here are five top tips to help you start saving for retirement so you can get there confidently.

#1 — Start early

It sounds a little obvious but the earlier you start saving, the easier it will be to grow a sizeable nest egg.

The power of compound interest takes a while to kick in so the earlier you can start, the more you’re going to have at retirement.

Even delaying saving for retirement from age 25 to 30 can equate to hundreds of thousands of dollars by the time you reach 65.

“Compound interest is the most powerful force in the universe.”

“Compound interest is the greatest mathematical discovery of all time.”

These quotes are from none other than Albert Einstein.

I’d say that’s a pretty ringing endorsement for compound interest and hopefully encouragement to get started saving more today.

Even if you’re in your twenties, it’s never too early to start planning for your future.

Also, even if you’re in your fifties, it’s never too late to get started.

#2 — Increase retirement contributions every year

Once you are in the habit of saving for retirement, you will almost certainly keep it up.

You shouldn’t simply leave it at that, though, as increasing your contributions each year will only get you there quicker.

For younger savers, the fact that your salary is likely to increase over time will only further boost your future savings.

Moreover, the fact you’ll be earning more means that the extra 1–2 per cent increase every year won’t even be noticed.

Have a greater and greater percentage of your income diverted into your retirement account and your ultimate savings will grow by tens of thousands of dollars.

#3 — Diversify your investments

You’ve heard the saying “don’t put all your eggs in one basket” many times throughout your life.

However, it’s absolutely vital when dealing with retirement savings.

Diversification is pivotal.

If your retirement is tied up in just one mutual fund or stock (remember Enron?), you’ll be incurring an enormous amount of risk should any problems occur.

Conversely, a diverse portfolio of stock and bond mutual funds will put you in a much safer and comfortable position.

#4 — Rebalance your investments annually

Saving for retirement is an ongoing challenge, which is why you can’t afford to overlook the need to help your portfolio over time.

An annual investment rebalancing act should be top of mind.

Rebalancing ultimately means taking stock of your portfolio once a year to ensure that it follows the same allocation you initially set out with.

For example, if you had a 50–50 share between stocks and bonds a year ago, the balance will now be out of sync because one of the two probably did better than the other.

If you want to avoid allowing your portfolio to become riskier, completing the annual rebalancing act is vital.

Otherwise, you could have the same risks as not diversifying in the first place.

#5 — Ask for help from a financial advisor

They say that a problem shared is a problem halved, and those sentiments can ring true when it comes to your retirement saving endeavours.

Support is available, so take advantage of it.

There are many reputable financial advisors to guide you with your saving for retirement journey.

Additionally, there are a number of websites that will provide you with plenty of information.

If you still need help you can always reach out to a professional certified financial planner as well.

Save for retirement takeaway

Saving for retirement is an immensely important part of your life, and it’s crucial for protecting your future for you and your family.

Without it, the fear of running out of money in retirement can feel insurmountable.

Keep each of the five points above in mind when saving for retirement and be sure to set up reminders on an annual basis.

It may feel like a lot of effort now, but it could be the key to making your golden years actually feel golden.

* Clint Haynes is a certified financial planner, financial advisor and founder and owner of NextGen Wealth.

This article first appeared at barbarafriedbergpersonalfinance.com.

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